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1. Company Snapshot

1.a. Company Description

Anglo American plc operates as a mining company worldwide.The company explores for rough and polished diamonds, copper, platinum group metals, metallurgical and thermal coal, and iron ore; and nickel, polyhalite, and manganese ores, as well as alloys.Anglo American plc was founded in 1917 and is headquartered in London, the United Kingdom.

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1.b. Last Insights on AAL

Anglo American's recent performance was driven by a planned merger with Teck Resources, creating one of the largest copper producers. The deal, valued at $53 billion, marks the second-biggest ever in the sector. Copper demand is soaring due to electric vehicles and AI data centers. The merger is expected to create a powerhouse in copper. Anglo American shares jumped about 9% on the announcement, hitting multi-month highs. (Source: Yahoo Finance)

1.c. Company Highlights

2. Anglo American Delivers Resilient Performance Despite Challenging Market Conditions

Anglo American reported a solid financial performance in its 2024 results, with EBITDA margin remaining stable at 30% despite a 10% decline in basket prices. Full-year EBITDA stood at $8.5 billion, supported by $1 billion in cost savings, which were ahead of schedule. Revenue for the year declined 12% to $3.9 billion, driven primarily by lower iron ore prices. Net debt remained flat at $10.6 billion, with a net debt to EBITDA ratio of 1.3 times, within the target range. The company also announced a final dividend of $0.22 per share, maintaining its 40% payout policy.

Publication Date: Feb -25

📋 Highlights
  • Strong Financial Performance Despite Market Challenges: Anglo American reported stable EBITDA margins of 30%, with full-year EBITDA of $8.5 billion, supported by $1 billion in cost savings. Despite a 10% decline in basket prices, cash conversion reached 97%, and net debt remained flat at $10.6 billion.
  • Strategic Milestones and Portfolio Simplification: The company completed key transactions, including the sale of its steelmaking coal business for up to $4.8 billion and its nickel business for up to $500 million. Additionally, Anglo American announced a partnership with Codelco to optimize copper production at Los Bronces and Andina, expected to generate $5 billion in pre-tax value.
  • Operational Excellence and Safety Progress: While the company regretfully noted three workplace fatalities, it achieved a 28% improvement in lost-time injury frequency rates since 2022. Strong performances in copper and iron ore were highlighted, with Quellaveco copper production at $1.05 per pound and record performance at Minas-Rio.
  • Market Challenges in Diamonds and Transformation Progress: De Beers faced challenges due to economic slowdowns in China and lab-grown diamond penetration, resulting in breakeven performance for the year. However, the company is preparing for the separation of De Beers and has secured a long-term supply agreement in Botswana.
  • Focus on Copper and Iron Ore for Future Growth: Anglo American is positioning itself for long-term growth with a focus on copper and iron ore. The company is on track to complete its transformation by 2025, with the demerger of Anglo Platinum planned for mid-2025 and a strong lineup of copper projects, including Collahuasi, Los Bronces, and Quellaveco.

Operational Excellence and Strategic Progress

The company made significant strides in operational excellence, with a 28% improvement in lost-time injury frequency rates since 2022. Key strategic milestones included the sale of the steelmaking coal business for up to $4.8 billion and the nickel business for up to $500 million. Anglo American also announced a groundbreaking partnership with Codelco to develop a combined mine plan for Los Bronces and Andina, expected to generate $5 billion in pre-tax value. The company remains on track to complete its transformation by the end of 2025, with the demerger of Anglo Platinum planned for mid-2025 and the separation of De Beers conditional on diamond market recovery.

Valuation and Strategic Outlook

Anglo American's valuation metrics reflect its strategic positioning. The company's enterprise value to EBITDA ratio stands at 4.89, indicating a reasonable valuation given its strong cash generation and cost discipline. The dividend yield of 2.19% provides an attractive return for investors. However, the negative ROIC and ROE metrics raise concerns about the company's profitability. Management emphasized its focus on delivering value-accretive growth, operational efficiency, and portfolio simplification to position the company for higher margins and returns in the future.

Strategic Moves and Future Growth

Anglo American's strategic moves, including the demerger of Anglo Platinum and the partnership with Codelco, are expected to drive long-term value. The company's focus on copper and iron ore, which accounted for 76% of EBITDA, positions it well to capitalize on future demand growth. The MOU with Codelco to optimize the Los Bronces and Andina mines is a testament to the company's innovative approach to resource development. With a strong financial position and a simplified portfolio, Anglo American is well-placed to deliver shareholder value in the coming years.

3. NewsRoom

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BHP Just Blinked: The $60 Billion Copper War Takes a Shocking Turn

Nov -24

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Stocks to Watch Monday: Alibaba, Tesla, Alphabet, Performance Food

Nov -24

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BHP scraps Anglo American copper mega-merger after repeat failed bids

Nov -24

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BHP walks away from late attempt at Anglo American takeover

Nov -24

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Basic Materials Roundup: Market Talk

Nov -24

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BHP abandons latest takeover approach for mining rival Anglo American

Nov -24

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BHP Ends New Anglo Takeover Bid After Rejection

Nov -24

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BHP Says It's 'No Longer Considering' Anglo Takeover

Nov -24

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.76%)

6. Segments

Copper

Expected Growth: 4.8%

Copper demand driven by electrification of transport and decarbonisation of energy systems, supported by copper-intensive renewable energy technologies and grid infrastructure, will drive growth in Anglo American's copper segment.

Iron Ore

Expected Growth: 4.7%

Growing demand from steel producers in Asia, increasing urbanization, and infrastructure development drive Anglo American’s iron ore segment growth.

Platinum Group Metals

Expected Growth: 4.5%

Strong automotive demand, growing industrial usage and limited supply growth drive Anglo American's Platinum Group Metals segment growth, supported by increasing adoption of emission-reducing technologies.

Steelmaking Coal

Expected Growth: 5.3%

Anglo American's high-quality metallurgical coal supplies to global steel production are driven by growing demand from infrastructure development, urbanization, and increasing steel intensity in emerging markets.

De Beers

Expected Growth: 4.5%

De Beers' market share is driven by its strong presence in southern Africa and Canada, as well as increasing demand for luxury goods in emerging markets.

Nickel

Expected Growth: 4.2%

Growing demand in stainless steel production and increasing adoption of electric vehicles drive Anglo American’s Nickel segment growth

Manganese

Expected Growth: 5.5%

Robust demand for manganese in steel production, increasing adoption in battery technologies, and Anglo American’s efforts to improve operational efficiency will drive growth in the manganese segment.

Corporate and Other

Expected Growth: 5.6%

Anglo American plc's corporate functions, exploration, and other non-operating entities are expected to grow driven by increasing investment in digital technologies, cost savings initiatives, and improving operational efficiencies.

Unallocated Special Items and Remeasurements

Expected Growth: 4.8%

Anglo American’s unallocated special items and remeasurements are expected to grow driven by increasing commodity prices, cost savings initiatives, and strategic portfolio reshaping, which will improve operational efficiencies and drive long-term sustainable growth.

Unallocated Associates and Joint Ventures

Expected Growth: 4.5%

Anglo American's Unallocated Associates and Joint Ventures, including De Beers and Debswana, are expected to drive growth driven by increasing demand for rough diamonds and Botswana's stable mining environment.

Crop Nutrients

Expected Growth: 4.5%

Growing global population and increasing need for sustainable agricultural practices drive demand for crop nutrients, providing Anglo American plc with opportunities for growth.

7. Detailed Products

Iron Ore

A key ingredient in the production of steel, used in construction, transportation, and consumer goods.

Copper

A highly conductive metal used in electrical wiring, electronics, and construction.

Metallurgical Coal

A type of coal used in the production of steel, providing energy and reducing agents.

Nickel

A corrosion-resistant metal used in alloys, batteries, and other industrial applications.

Manganese

A key component in steel production, used in alloys and as a pigment.

Platinum Group Metals (PGMs)

A group of rare and valuable metals used in catalytic converters, jewelry, and other industrial applications.

Diamonds

A precious gemstone used in jewelry and industrial applications.

8. Anglo American plc's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Anglo American plc is medium due to the availability of alternative metals and minerals. While the company's products are essential for various industries, customers may switch to alternative materials or suppliers if prices become too high.

Bargaining Power Of Customers

The bargaining power of customers for Anglo American plc is low due to the company's diversified customer base and the lack of concentration in the market. Customers have limited bargaining power, and the company has a strong market position.

Bargaining Power Of Suppliers

The bargaining power of suppliers for Anglo American plc is medium due to the company's dependence on certain suppliers for critical inputs. While the company has a diversified supplier base, some suppliers may have significant bargaining power.

Threat Of New Entrants

The threat of new entrants for Anglo American plc is low due to the high barriers to entry in the mining industry. New entrants would require significant capital investment and would face significant regulatory hurdles.

Intensity Of Rivalry

The intensity of rivalry for Anglo American plc is high due to the competitive nature of the mining industry. The company faces intense competition from other major mining companies, and the market is highly competitive.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 40.30%
Debt Cost 7.74%
Equity Weight 59.70%
Equity Cost 7.74%
WACC 7.74%
Leverage 67.49%

11. Quality Control: Anglo American plc passed 2 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

29.8$

Current Price

29.8$

Potential

-0.00%

Expected Cash-Flows